Evaluating the current equalization grant to counties in Croatia

Mihaela Bronić, Institute of Public Finance, Zagreb, Croatia

AbstractThis paper assesses the design of the 2005 equalization grant to the counties in Croatia. Since no allocation formula for this grant has ever been publicly disclosed, this paper provides an analysis and explanation of the aforesaid formula. At the time of its introduction, the objective of the equalization grant was to mitigate differences in fiscal capacities among counties, so our work is focused on fiscal capacities and on whether the new formal allocation rule set by the central government follows the predetermined objective in the grant allocation. This article proves our hypothesis that the new equalization grant does not adequately mitigate the differences in fiscal capacities across Croatian counties.